Freddie Mac's $966 million STACR 2014-DN2 deal, its second offering of STACR notes this year, is being pre-marketed this week, according to an Interactive Data Report.
The securities are unsecured obligations of the government sponsored enterprise; yet their principal repayment is based on the prepayments and defaults on a reference pool of more than $20 billion of residential mortgages acquired by Freddie in the third quarter of 2012. They provide a form of credit enhancement to Freddie, assuming some, but not all, of the risk of the underlying loans.
In early February, Freddie launched the $1.0 billion STACR 2014-DN1 transaction. The deal offered three tranches with different levels of credit support. The previous GSE risk-sharing securitizations, offered only two tranches (M1 and M2).
STACR 2014-DN1 was backed by approximately 140,000 loans totaling up to $32.9 billion in unpaid principal balance. Regarding pricing, the M1, M2 and M3 tranches were sold at L+100 basis points, L+220 basis points and L+450 basis points respectively.
J.P. Morgan said at securitization conference earlier this month that it expects up to $10 billion in issuance of "risk-transfer" deals by Fannie Mae and Freddie Mac. The bank initially expected issuance to range from $5 billion to $6 billion. In addition to the two Freddie Mac deals, Fannie Mae priced its $750 million CAS 2014-C01 deal in January.
Analysts at the banks said that there have been discussions about the potential for larger transactions tied to the risk of mortgages with higher loan-to-value ratios than those linked to the initial deals.